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Ralph Lauren (RL - Free Report) is among the few stocks in the Luxury Retail space that are witnessing strong growth, mostly tied to the prosperity of the industry. The Luxury Retail segment is flourishing, mainly due to the robust consumer environment, owing to strong economy, alongside low unemployment level and higher income. The rise in disposable income has lifted consumers’ spending appetite, which is clear from the increasing demand for luxury items, including premium apparel, accessories and others.

This undoubtedly is a positive sign for the Textile-Apparel (Luxury Retail) industry, which is placed in the top 11% (28 out of 255) of the Zacks industries. Further, robust earnings outcome of most players in the recent quarter, followed by an upbeat view for the fiscal, shows prospects of the industry. Notably, the industry has surged nearly 36.1% in the past year, reflecting solid momentum.

The investment world believes that the momentum in any industry is well reflected in stock gains for its players. This belief is true for Ralph Lauren, which has comfortably outpaced the industry’s growth in the past year, with a rally of 47.9%.

This growth is backed by its key initiatives that focus on its core business, improving product assortments and delivering better quality of sales. Further, the company’s efforts to boost international presence and investments to enhance digital platforms bode well. This is well reflected in its robust surprise history and favorable outlook for fiscal 2019.

Moreover, this Zacks Rank #2 (Buy) company’s impressive long-term earnings growth rate of 9.6% and a VGM Score of B profess that there is more upside potential left. Let’s find out other reasons that are aiding the Ralph Lauren stock.

International Expansion

As part of its key initiatives, Ralph Lauren remains keen on bolstering international presence. It is continually expanding in underpenetrated markets, with highly productive small-format stores. In the past two years, the company has elevated the brand in Asia, particularly China, and built strong business foundation by enhancing the quality of sales and profitability.

In first-quarter fiscal 2019, its constant-currency revenues in China grew more than 25%, with over 40% of this growth coming from Mainland China. The company’s digital business in China reflected solid growth through Tmall, JD.com and WeChat.

The company opened seven distribution points in China in the fiscal first quarter. It estimates opening more than 50 stores in fiscal 2019. Further, it remains on track to generate nearly $500 million of revenues from China in the next five years. Overall, constant-currency revenues in Asia improved 16%, with comparable sales (comps) growth of 6%, instilling confidence in the company’s strategy for Asia.

Digital Growth Strategy

Expansion of digital platforms is a major component of Ralph Lauren’s global growth strategy. In fiscal 2018, it developed a winning digital ecosystem, including directly-operated platforms, wholesale digital, pure plays and social commerce. The overall digital business improved 7% globally in the fiscal first quarter, with 24% growth coming from the international business and North America up slightly.

After completing the development of its directly-operated North America e-commerce business, the company upgraded the European e-commerce business to directly-operated platform in the fiscal first quarter. This transition is expected to enhance shopping experience at its website, with enhanced search, navigation and checkout process. Additionally, the company’s digital wholesale business has also been witnessing marked improvements, driving market share gains in this channel at key retailers and categories.

Way Forward Plan & Restructuring Actions

Ralph Lauren remains on track to deliver its goals under its Way Forward Plan, announced in June 2016. The plan is all about refocusing on the core, strengthening the brands and returning the company to profitability in the long term. Remaining committed to focusing on its core business, it has been keen on improving assortments by discontinuing unproductive styles. In addition to curtailing its number of Stock Keeping Units (SKUs) and closing underperforming stores, Ralph Lauren is on course to reduce supply chain lead times to improve sales quality and lower markdowns.

Apart from this, Ralph Lauren is well on track with its restructuring plan, which is likely to generate savings of roughly $140 million by the end of fiscal 2019. These restructuring activities include rightsizing the portfolio and cost-structure, alongside streamlining the structure of the organization.

G-III Apparel has rallied nearly 60.2% in the past year and has a long-term earnings growth rate of 15%.

Michael Kors has a long-term earnings growth rate of 6.8%. Additionally, the stock has surged 64.4% in the past year.

lululemon has surged a whopping 150.3% in the past year. Moreover, the company has long-term earnings growth rate of 18.7%.

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